Friday, June 29, 2012

How We’re Saving now that our Mortgage is Gone

We don’t make great money, but we are great savers. This means that when it came time to buy a condo, although we had lost a bundle on our first home, we could still afford to purchase the property outright. This also means that we don’t have a mortgage.

Now don’t get jealous. It’s not like we’re living a life of luxury in a huge mansion and driving fancy new cars or anything like that. We live in a modest, two bedroom one bath condo and live a regular lifestyle. However, being able to live without a mortgage, begs the question, where does our money go now that we don’t have to pay the bank?

Rebuilding Emergency Savings
Our first move will be to begin rebuilding our emergency fund. After putting most of our available cash toward our home, we are going to be left a bit short in this area initially. We like to try to have at least a $5,000 emergency fund on hand as a reserve in a checking account since we feel that this number can cover a variety of unexpected events and costs.

However, this rebuilt fund likely won’t last long due to the following expenses on this list, and which will once again drain our coffers.

Baby Costs
With a new baby on the way, we are planning to be hit with medical and baby preparation expenses in the range of $6,000 to $7,000 come this fall. Pair this with a property tax bill coming along to the tune of about $1,400 or $1,500, and we’re looking at a sizeable chunk of change. This means that our rebuilt (hopefully) emergency fund will be put toward these costs. Thankfully, without mortgage costs, we are hoping to be able to save an additional $400 to $500 a month until this time, which will be put solely toward these costs.

Schooling/College Savings for Kids
After the baby and property tax costs have been put behind us, it will be time to start looking ahead toward the future. Of course, our first son will be heading off to elementary school soon, which means additional costs, and of course with a new baby, there will be continued supply costs there as well. However, we hope that even with these additional expenses to be dealt with, we will still be able to put a little extra cash each month toward saving for our kids’ eventual college costs.

What little is left after the aforementioned expenses will be put toward our retirement savings. At this point, once those larger lump sum costs I mentioned previously have been paid off in full, my wife (who recently started a new job) may begin to contribute to her employer-sponsored retirement plan. And since I’m self-employed, I will likely be putting any extra cash (which there won’t be much of) toward those college savings for the kids and again, attempting to rebuild our emergency fund.

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